Sins of Compensation: Top Job Offer Mistakes to Avoid

Despite the headlines about layoffs, inflation and recession, it’s still a candidate's market, with 11 million open jobs in June and 40% of employees planning to quit. Companies are still in competition for talent. Only now they have a tighter rein on spending. At the center of this is compensation, a company’s biggest expense and one of the top reasons candidates decide whether to accept an offer.

To help companies with these priorities, we’re sharing how to prevent the top compensation mistakes in five stages of the employee journey.

• The interview process
• Sending offers
• Quarterly reviews
• Merit cycles
• Company milestones

In this article, we’re exploring mistakes and solutions in the offer stage.




If you’ve talked compensation and gotten to know the candidate during the interview stage, you’ll be in a better position to present an offer they’ll accept. Still, there are a few missteps that can undermine the positive progress of the previous stage. Here are the top 3 mistakes companies make during the offer stage and how to prevent them.

Mistake #1: Making an offer before the candidate is ready

Solution: Check with candidates about whether they have questions or concerns

You’ve completed all the steps in the interview process and you’re ready to present the offer — but that doesn't mean the candidate is ready to receive it.

Make sure they have all the information they need to understand the role, offer and the benefits of joining your company. Give them another opportunity to ask questions so you can address any concerns or objections, rather than leaving them to guess the answers as they weigh your offer.

“Keep in mind the candidate might have another timeline they’re considering,” Jose Guardado, seasoned recruiter, operator and founder of Build Talent. They may have competing offers, they might need to get other opinions on the decisions, specifically their partner.”

Aim for no surprises in the offer letter. “If you’re having transparent conversations along the way about the range, job levels and your assessment of them, by the time you get to the end of the process, you’ll have their buy-in and they’re basically agreeing to an offer before you even send it,” says Ashley Brounstein, OpenComp’s Head of People.

Mistake #2: Allowing big tradeoffs between cash and equity

Solution: Understand what’s important to the candidate and present options within certain boundaries

If you give candidates two offers with different ratios of cash and equity (lower cash–higher equity, and the reverse), you’ll run some risks, including:

• Setting the stage for disappointment. The multiple-offer strategy reveals the higher ranges for different scenarios. That means you’re also offering less ideal versions. And even if the candidate chooses the offer they want, knowing they’re getting less than the top of the range for either cash or equity can be disappointing.
• Errors in record-keeping. If a candidate opts for lower cash, there’s a chance later down the line that a new HR team may overlook the tradeoff. For example, the pay for an employee who chose lower cash and higher equity might be adjusted so that they’re at the high level for both.
  

Traunza Adams, serial chief people and founding board member of OPEN Imperative says that recently, she’s spent more time trying to understand what’s important to the candidate so by the offer stage, she has a good idea of how big a role equity will play and can create the offer accordingly.

Mistake #3: Perpetuating information inequity

Solution: Educate candidates about the value of equity

Equity is so complicated that even the most seasoned execs can benefit from training on it.

Candidates who are less informed about equity might opt to receive less of it. Or they might not understand the potential value of offers with higher equity than cash and decline. This knowledge gap means workers could miss out on a considerable amount of money, and companies could miss out on excellent employees.

That’s why it’s worth investing the time to educate candidates about the equity component of your offer and what it could mean for them long term.

“If you build that education into your process, you create trust with the candidate,” says Guardado. “That's a good way to get to the heart of what they're what they need and avoid that either-or offer scenario where you've got two different versions of the same offer.”

Get it right

Intelligent Offers (coming soon)
Develop your compensation strategy, create and send offer letters and everything in between from a single tool.

Intelligent Offers can also keep your team aligned on compensation decisions to eliminate industry and experience bias, while historical analytics help hiring managers see what offers are most likely to be accepted.